Sharp price hikes cause alarm

Unexpectedly sharp price rises in April for local cereals like millet, rice and maize in parts of Mali, Burkina Faso, Niger and Chad mean many vulnerable people in the drought-hit Sahel could find it even harder to get enough to eat.

The high prices of basic foods are the most alarming feature of the current Sahel crisis, according to the Famine Early Warning Systems Network (FEWS NET) of the US Agency for International Development (USAID). Prices are expected to keep rising until the end of August - during the lean season - but the size of recent hikes has surprised food price analysts and humanitarian aid personnel.

In Burkina Faso’s capital, Ouagadougou, local millet is 85 percent above the five-year average, and in Mali’s capital, Bamako, it is more than double, said Jean-Martin Bauer, the Food Security Monitoring Systems leader at the UN World Food Programme (WFP).

In Ouagadougou a 100kg bag of millet cost 26,000 cfa (US$49) in May 2012, compared to 15,000 cfa ($28) in May 2011, while in Bamako a 100kg bag of millet cost 28,500 cfa ($53) this year but only 14,000 cfa ($26) a year ago, according to UN Food and Agriculture Organization (FAO) monthly reports.

This volatility - when prices move outside of historical minimum or maximum increases, as they did in April - is as important to watch as steadily rising levels, said Gary Eilerts, Programme Manager at FEWS NET. Aid agencies say the very poor, who own no land or animals of their own and must buy most of their food, are worst affected.

Why are local grains so expensive?

The price of key foods is still very high across the globe. In February 2011 they reached a historic peak, partly linked to the rise in bio-fuel costs, the impact of speculation, and high oil prices, dropping by six percent in March 2012.

Analysts have questioned why these global price trends have also touched millet and sorghum - grains that are consumed in the Sahel but not globally.

While each Sahelian country has its own specific price dynamic – markets are disrupted in Mali partly because of conflict and displacement for instance – many of the answers can be found in Nigeria, which supplies half of West Africa’s cereal needs, Bauer noted.

Economic growth in Nigeria has boosted domestic grain demand for human consumption, as animal feed, to produce beer, and for other uses, yet even steeply rising production - Mali and Niger produced 5 million mt of these grains plus other cereals in 2010 - cannot keep up with demand.

Ghana, too, has mounting consumption rates of these and other grains in its booming, oil-fuelled economy; and it has also been pushing agro-industrial development, including large poultry farms, which require grain as feed.

The Niger-Nigeria price differential for grains “is still what it should be”, Bauer said. One kg of millet costs 222 cfa (45 US cents) in Maradi, a trading hub in southern Niger, and 200 cfa (40 US cents) across the border in Nigeria, which means exports are flowing normally. But Nigeria’s capacity to respond to demands in the Sahel has weakened.

A 50 percent fuel price rise in January 2012 has increased food transport costs. Boko Haram - a jihadist group using violent means to establish Sharia law in northern Nigeria - caused the government to close the eastern border, bringing slowdowns in trade in western Chad and Niger. However, Chad, northern Cameroon and Niger are all still tapping into the same supply pool.

Sahel grain price trends

Prices started unseasonably high in October 2011 due to late harvests and unusually high demand, with traders - anticipating a problem - buying up large quantities of grains to sell on to governments and aid agencies, according to FEWS NET.

In much of Mali and Burkina Faso, prices have risen every month since October 2011, aside from a brief dip in January 2012, says Jean-Martin Bauer, Food Security Monitoring Systems Team Leader at the World Food Programme.

In Niger the trend was different, with sharp increases in November and December 2011 followed by a slight dip in January 2012, and slight increases in February and March. Chad experienced relatively stable prices in early 2012 after sharp increases in 2011.

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“Demand is getting stronger by the day, while supplies across the Sahel are approaching their seasonal low,” said Bauer.

Narrowing gap

The dynamic is unusual. The price of imported grains is traditionally much higher than local grains, but this gap is “seriously narrowing”, said Bauer. For instance, imported rice usually costs roughly twice as much as local millet - as it did in May 2011 - but now a 50kg bag of millet in Bamako sells for 28,500 cfa ($54), while a bag of imported rice costs 35,000 cfa ($66), and 50kg of locally grown rice is priced at 42,500 ($81).

FEWS NET’s Eilerts said other reasons for the sharp price rise in April may be because traders think institutions (governments, aid agencies) are still interested in buying large quantities of food, but “it might start raining, which means prices will drop,” he said.

Buy cautiously

FEWS NET warns that in this context, “local and regional procurement [by aid agencies] should proceed cautiously”. Governments are by far the biggest grain buyers in West Africa, but WFP, a significant purchaser, is careful to buy only off-market grains from long-term national stocks in Nigeria so as to limit the risks to local markets.

Rather than only buying grain to distribute, WFP is also boosting its cash voucher distributions in Niger, Mali, Senegal, northern Cameroon and Burkina Faso. The amounts given will not be able to keep up with rising prices, but a small buffer is built in to absorb some of the anticipated monthly price increases during the lean season, said Margie Rehm, WFP’s cash-for-change programme officer. WFP has calculated that a household in Niger would receive vouchers worth 32,500 cfa ($62) per month, and one in Mali would get 25,000-36,000 cfa ($47-68), depending on where it is located.

Market interventions

Many agencies, including the international NGO, Oxfam, say that given the right market conditions, cash vouchers can be an important social protection mechanism for poor households. Several other interviewees said less targeted measures - such as subsidies or reduced taxes on cereals, which the government is taking to try to control prices - are expensive and inefficient because the rich also benefit.

Mali has lowered taxes on imported rice. Niger, Chad and Mauritania have made subsidized grains available. The new government in Senegal is attempting to bring down cereal prices through consultations with importers, distributors and consumer groups. Burkina Faso has tried to fund selected traders to sell staple grains at reduced prices, but they did not respect the contract and the government now aims to open shops in 182 communes, selling rice at $14 per 25kg bag.

Such temporary measures to control costs “do have a role”, but historically they have been “very difficult to implement - subsidies generally don’t work well in West Africa - they can end up making problems worse”, said one food price specialist.

The Mali and Burkina Faso governments also banned grain exports, but blocking borders usually doesn’t work, said Eilerts. “People just try harder and pay more to get around them, and farmers, seeing a blocked market, may be disincentivized to produce, pushing down production,” which can have the opposite effect, he told IRIN.

Given chronic food deficiencies and malnutrition in the Sahel, governments need to set up safety nets that work in the long term, and can also be ratcheted up in an emergency, several interviewees told IRIN. “If measures are already in place, when the drought comes, governments should be able to shift gears,” said Bauer.

Aid efforts across the Sahel are currently keeping millions of people alive, but the aid “remains insufficient to fully mitigate food insecurity in northern Mali, parts of Burkina Faso, and western Niger”, FEWS NET said in its May briefing.

“We can do more to avoid catastrophe,” the UN Emergency Relief Coordinator, Valerie Amos, said at a press conference on 24 May in the Senegalese capital, Dakar. “We need good leadership, strong coordination; each country needs a comprehensive response plan and funding from the humanitarian community.”

Some $715 million of the $1 billion required for food and nutrition aid across the Sahel has been committed, according to the 18 May snapshot from the Office for the Coordination of Humanitarian Affairs (OCHA), which estimates that non-food sectors like health, clean water, education and protection bring the needs to at least $1.5 billion.

Agriculture, livestock and non-food sectors are severely underfunded. In the emergency appeal for Chad, funding for education is at only 6 percent of the requested amount, and for water and sanitation just 8 percent, while in Niger’s appeal, education is 0 percent funded, with water and sanitation at 18 percent, according to OCHA.

“An integrated response is needed,” Amos told IRIN. ”Healthcare is particularly important, clean water and sanitation are critical, and we need to go beyond immediate relief efforts to support people’s livelihoods in the long term.”

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